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Choctaw Co. completed the following transactions in 2018, the first year of operation: Issued 28,000 shares...

Choctaw Co. completed the following transactions in 2018, the first year of operation:

Issued 28,000 shares of $10 par common stock for $10 per share.

Issued 3,800 shares of $20 stated value preferred stock for $20 per share.

Purchased 1,800 shares of common stock as treasury stock for $12 per share.

Declared a $2,800 cash dividend on preferred stock.

Sold 800 shares of treasury stock for $14 per share.

Paid $2,800 cash for the preferred dividend declared in Event 4.

Earned cash revenues of $94,000 and incurred cash expenses of $49,000.

Appropriated $8,800 of retained earnings.

Required

Organize the transaction in accounts under an accounting equation.

Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018.

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement 1

Accounting Equation: ASSETS = LIABILITIES + EQUITY

--retained earnings includes Net Income

Event no.

ASSETS

=

LIABILITIES

STOCKHOLDER'S Equity

Income Statement

Cash

=

Liabilities

+

Common Stock

+

Preferred Stock

+

Paid In Capital

+

Retained earnings

+

Treasury Stock

Revenues

Expenses

Net Income

1

$        2,80,000.00

=

+

$                 2,80,000.00

+

+

+

+

$                                  -  

2

$            76,000.00

=

+

+

$            76,000.00

+

+

+

$                                  -  

3

$         (21,600.00)

=

+

+

+

+

+

$        (21,600.00)

$                                  -  

4

=

$             2,800.00

+

+

+

+

$          (2,800.00)

+

$                                  -  

5

$           11,200.00 [800 x 14]

=

+

+

+

$                   1,600.00 [800 x 2]

+

+

$             9,600.00 [800 x 12]

$                                  -  

6

$            (2,800.00)

=

$           (2,800.00)

+

+

+

+

+

$                                  -  

7

$            45,000.00

=

+

+

+

+

$          45,000.00

+

$          94,000.00

$                49,000.00

$                  45,000.00

8

=

$             8,800.00

+

+

+

+

$          (8,800.00)

+

$                                  -  

Ending balance

$        3,87,800.00

=

$             8,800.00

+

$                 2,80,000.00

+

$            76,000.00

+

$                   1,600.00

+

$          33,400.00

+

$        (12,000.00)

$          94,000.00

$                49,000.00

$                  45,000.00

  • Requirement 2

The stockholders’ equity section of the balance sheet as of December 31, 2018

Common Stock [28,000 issued, 27,000 outstanding, $10 par]

$      2,80,000.00

Preferred Stock [3800 issued and outstanding , $20 par]

$           76,000.00

Paid In Capital

$             1,600.00

Retained earnings

$           33,400.00

$       3,91,000.00

Treasury Stock [1000 shares at $12]

$        (12,000.00)

Total Stockholder's Equity

$       3,79,000.00

ekkarill92 answered 1 year ago
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